Grain prices tumble as U.S. sees bigger corn supply, wheat crops

Corn futures tumbled the most in five weeks, leading declines in wheat and soybeans, after the U.S. said inventories will be bigger than analysts’ forecast as global production rebounds from a drought last year.

Record domestic corn output of 14.005 billion bushels this year will more than double inventories before the harvest in 2014, and soybean production will be 3.39 billion bushels, the most ever, the U.S. Department of Agriculture said today in a report. While drought damage late last year will reduce the 2013 U.S. wheat harvest, global output will rise 6.1%.

Corn, soybean and wheat futures that surged as the drought cut output in 2012 have tumbled into bear markets this year, easing global food prices that are down 9.5% from a record in February 2011. Even after wet, cool weather in April and May delayed planting, the USDA said it expects a 30% jump in 2013 corn production in the U.S., the world’s largest grower and exporter, and a 12% increased for soybeans.

“The market is reacting to the larger supply forecast than people expected,” Dale Durchholz, the senior market analyst for AgriVisor LLC in Bloomington, Illinois, said in a telephone interview. “This report signals there is no shortage developing, and takes away much of the speculator incentive to be bullish.”

Corn futures for delivery in December, after the harvest, fell 2.4% to $5.3775 a bushel at 1:14 p.m. on the Chicago Board of Trade, heading for the biggest drop for a most-active contract since May 6. Prices through yesterday tumbled 35% from a record $8.49 in August.

Bigger Inventory

U.S. corn inventories before the 2014 harvest will total 1.949 billion bushels, up from 769 million this year, the lowest since 1996, the USDA said. The average estimate of 30 analysts surveyed by Bloomberg was 1.829 billion. The government said production in 2013 will be higher than the average estimate of 13.82 billion, based on a separate Bloomberg survey of 28 analysts. Farmers collected 10.78 billion in 2012.

World corn inventories on Oct. 1, 2014, will total 151.83 million metric tons, up from 124.31 million this year, the USDA said. Analysts expected 151.21 million tons, the average of 16 forecasts in a Bloomberg News survey.

U.S. wheat stockpiles on June 1, 2014, were forecast by the USDA at 659 million bushels, more than the 655 million expected by analysts and down from 670 million projected in May. Production in Kansas, the biggest U.S. producer, was pegged at 307.8 million bushels, up 2.7% from a May forecast, as precipitation in May boosted prospects for late-blooming plants.